Brexit happened. So what now for hospitality in the UK?

The United Kingdom’s announcement to exit the European union had instant repercussions – a number of UK based companies watched their stock prices fall while the pound plummeted to its lowest point in 30 years.

And as expected, these events are bound to have a massive impact on the landscape of hospitality in not just the country, but all of Europe and possibly the rest of the world as well.

While things look bad now, the short term effects of the referendum say little about what’s to be expected in the coming months and years. Having said that, it still makes sense to probe a little into the current state of things to get an idea about the immediate reaction.

Higher operating costs & lower RevPAR:

The Sterling’s fall will have far-reaching consequences for hospitality businesses in the country. Expenditure in areas like energy, transportation, raw materials, and so on will go up, raising operational costs. OTA commissions will become more significant as hotels will have no choice but to increase their room rates to offset some of the loss. Software expenses will also drive up overhead costs, especially for properties relying on in-premise property management systems that demand regular maintenance and dedicated IT teams to operate. As a result, more hotels are expected to switch to cloud property management systems.

These rising costs are expected to have a detrimental effect on the revPAR – which had been growing steadily over the last 30 months before slowing down as a result of the recent developments.

Implications on employment & trade:

The overwhelming majority of hotels in the UK have a number of European staff on their payroll, enabled by the free flow of labor within countries in the European union. With the UK opting to leave the union however, work permits and other legalities could significantly lengthen the migration process for expatriates looking to work in the country. This would make it a lot harder for hotels to attract skilled personnel, such as restaurant chefs from other European countries.

These restrictions spread to trade as well. As the UK would now be operating under different principles, industries will need to navigate the new policies – a process that could take a long time. The country will also have to establish different trade agreements with each future trade partner.

Increased tourism appeal:

Perhaps the biggest positive to come from the falling pound is the increased accessibility to Britain as a travel destination for tourists around the world. While the middle-class British population will be deterred from taking vacations abroad, travelers outside the country seem to be gearing up for an extravagant trip to the island. According to Jack Ezon from Ovation Vacations, there’s no better time to visit the UK. “Prices are now 10 to 15 percent lower than last week and 30 percent lower than two years ago,” he said.

While it’s definitely too early to draw a hard consensus on the long term impact of Brexit, hoteliers would do well to stay aware of going-ons. After all, hospitality is one of the most unpredictable industries and we can never tell with absolute certainty what’s around the corner.

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